Microsoft Highlights 2007 Business Challenges, Opportunities

There are a number of challenges and opportunities that will affect Microsoft's financial performance in the fourth quarter of 2006 as well as its 2007 fiscal year, the company said.

During a media and analyst call on April 27, Chris Liddell, Microsoft's chief financial officer, spent a lot of time detailing the key assumptions the company used when forecasting expectations for those periods.

PC unit growth was estimated to rise between 10 and 11 percent in the fourth quarter, while total server growth was likely to remain unchanged at between 11 and 13 percent for the full fiscal year, Liddell said.

Microsoft also expects overall IT spending, and its ability to participate in the marketplace, to remain healthy, he said.

On the client side, Microsoft expects revenue growth of 7 to 8 percent for the fourth quarter, with OEM unit growth likely to grow in line with the market, but commercial and retail business growth is expected to lag in its overall growth, Liddell said.

With regard to servers and tools, expected revenue growth is 17 to 18 percent in the fourth quarter, buoyed by strong demand for SQL Server, Liddell said.

On the information worker side, revenue is expected to rise between 5 and 6 percent in the fourth quarter, with a broad public beta for Office 2007 to be released this spring.

But revenue for MSN is expected to fall between 4 and 5 percent in the fourth quarter, reflecting continued decreases in its Access business and the continued transition to its AdCenter. MSN is also not expected to be profitable in fiscal 2007, he said.

On a more positive note, home and entertainment revenue is expected to surge between 85 percent and 110 percent in the fourth quarter.